This is Gonna Hurt

White House Braces for Russian Retaliation Over Ukraine

If the U.S. moves to sanction Putin and his pals next week, Moscow will definitely strike back. Inside the Obama administration, officials are gearing up for an economic Cold War.

As Russian tanks amass on the Ukrainian border and John Kerry travels for a last-ditch meeting with his Russian counterpart, signs are increasing that Washington and Moscow are preparing for a series of punitive and retaliatory measures following a planned referendum in Crimea on Sunday.

President Obama and his team have repeatedly and loudly warned Vladimir Putin that unless Russia deescalates the current crisis, the U.S. in conjunction with its European partners will begin to increase the “costs” for the Russian government and business community, through a series of sanctions and other tactics. Meanwhile, behind the scenes, the Obama administration is preparing for the blowback that will sure come when Russia retaliates.

“Of course we are looking at the possibility of retaliation,” one administration official told The Daily Beast. “We’re looking at all areas of cooperation we have with the Russians.

"I don't want to go into all of the detail, except to say this: It can get ugly fast [if] the wrong choices are made," Kerry noted in Congressional testimony this week. "And it can get ugly in multiple directions."

One administration official told The Daily Beast that the White House’s National Security Council is leading an interagency process to examine all of the possible retaliatory steps Moscow might take if U.S. and European sanctions move forward. The potential counterstrikes include what this official called “asymmetric” actions by Moscow -- Russian actions against the U.S. that have nothing to do with Ukraine.

The NSC is preparing for potential Russian actions on all issues in its multi-faceted relationship with the United Stated: American military access to Afghanistan through Russia; Moscow’s cooperation on the destruction of Syria’s chemical weapons stockpiles; Russian pressure on Iran to strike a deal over its nuclear program; and much, much more.

American and European businesses in Russia could also fall victim to the Russian retaliation, especially if the West goes after Russian oligarchs and business leaders as part of its plan to pressure Putin, as the Obama administration has threatened.

There is a need to coordinate the preparations for Russian retaliation inside the White House because each U.S. government agency that deals with Russia might seek to protect its own projects, the official added. There is also disagreement inside the administration over how far to go with sanctions against Russia -- and how much economic pain to subject the American economy to in the name of punishing Putin.

“If we levy sanctions on Russia, there will be a counterstrike. We just need to make sure we don’t get surprised and we know what they are going to do in response.”

The New York Timesreported this week that inside the Obama administration, State Department officials are pressing for tougher sanctions sooner, while officials from the Treasury Department, Office of the U.S. Trade Representative, and White House economic office are urging more caution.

American and Russian officials both said Moscow is waiting to see what the West does before it decides how to strike back. But what all agree is that there will be a price to pay and U.S. businesses could be caught up in the fight.

“If we levy sanctions on Russia, there will be a counterstrike,” said Nick Burns, who served as Undersecretary of State for Political Affairs from 2005 to 2008. “We just need to make sure we don’t get surprised and we know what they are going to do in response. And you have to be aware of the trade-offs.”

The most likely retaliation: proportional responses for Moscow if Washington and its allies start freezing certain Russians’ assets and banning them from getting visas to Western countries.

For example, the U.S. Congress may work to expand the Magnitsky list, a roster of Russian human rights violators banned from traveling to the U.S., to include those involved in the invasion of Crimea. Moscow already has its own visa ban list for Americans, and could expand that in response.

“If we have mainly visa sanctions, then they are probably are going to have countermanding visa sanctions on us. If we have trade sanctions, they will very definitely take action against a corresponding American firm or industry or product,” said Burns. “The Russians are going to make sure there is parity. We are going to have to assume that. That’s what the administration is considering right now.”

U.S. companies such as Exxon Mobil and Ford have huge investments in Russia and could also become targets for retaliation. But Moscow also must keep in mind that sanctions Western businesses in Russia could cause a side effect of damaging the fragile Russian economy as well, he said.

Many European countries are more vulnerable to Russian retaliation due to their dependence on Russia for their natural gas. That’s why some Western European governments have been pushing back against Washington on the drive for tougher sanctions. The gap between the U.S. and countries such as France is hurting the effectiveness of the sanctions drive, experts said.

“What the Europeans need above all is a strong demonstration of American leadership, because without that they aren’t going to do much,” said Ian Brzezinski, senior fellow at The Atlantic Council.

There’s also a concern that in the effort to minimize the blowback from Moscow, the White House will produce sanctions too weak to convince Putin to change his calculus on Ukraine.

“The administration has got to make sure its measures are firm and strong and hard hitting and comprehensive, including diplomatic and military measures,” said Brzezinkski. “They should be less focused on calibration and retaliation control, and they should focus more on sending a strong message to Putin.”

Kerry will meet Russian Foreign Minister Sergei Lavrov in London Friday to try to negotiate a compromise over Crimea ahead of a Sunday referendum on secession that the U.S. said it would never recognize. A senior State Department official added that Kerry also warned Lavrov in a Thursday phone call about impending sanctions if Russia proceeded with aggressive moves.

Yet Russia’s help is crucial when it comes to completing the effort to remove Syria’s chemical weapons by a June deadline. Kerry noted on Thursday that the upcoming confrontation with Moscow could impact that. “Now there's a question mark about where that's going to go,” he said.

Meanwhile, Undersecretary of State Wendy Sherman is headed to Vienna next week for negotiations between Iran and world powers, including the U.S. and Russia. Administration officials said Thursday that as of now, there is no indication Russia is linking that effort to the current impasse over Ukraine.

Then there’s Afghanistan. The U.S. military has, for years, used this so-called “Northern Distribution Network” through Russia to supply its troops. They’d like to use the same path to get equipment out, especially with continued volatility in Pakistan. Gen. Joseph Dunford, who commands the war effort in Afghanistan, testified this week that the military could complete its withdrawal even if Russia cuts off the route.

"We've got resilience in the system and I'm not concerned at all about a loss of the Russian (routes in the) Northern Distribution Network," Dunford said.